7/30/2019 Concealment-Insurance Report Sec 26, 27, 28

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CONCEALMENT

SEC. 26 A NEGLECT TO COMMUNICATE THAT WHICH A PARTY KNOWS AND OUGHT TO

COMMUNICATE IS CALLED CONCEALMENT

Concealment Defined:

-Neglect to communicate that which a party KNOWS and OUGHT to know

A. The duty to disclose is required because insurance contracts are described as contractsUBBERIMAE FIDAE , means most abundant good faith, as per Lords Mansfield :

Insurance is a contract upon speculation.

Special Facts which the contingent chance is to computed, LIES MOST

Commonly in the KNOWLEDGE OF THE INSURED only.

Underwriters trust his representation, and proceeds upon the CONFIDENCE

that he does not keep back circumstances in his KNOWLEDGE, to mislead theunderwriter into a belief that the circumstances does not exist and to induce

him to estimate the risqu as if it did not exists

B. To be guilty of CONCEALMENT, it would be at the TIME OF KNOWLEDGE at the time ofthe effectivity of the policy.

C. Known changes in the conditions material to the risks which occur between theopenings of the negotiation for insurance of the policy must be revealed.

REQUISITES OF CONCEALMENT: Read together with Sec 28, there can be no concealment

unless:

1. A party knows the fact which he neglects to communicate or disclose to the other;2. The fact concealed is material to the risk;3. Such party is duty bound to disclose such fact to the others; and4. Such party makes no warranty of the fact concealed

Note: When a warranty is made of the fact concealed, the non-disclosure of such facts is not

concealment but constitutes a violation of warranty (Title 7)

SEC. 27 A CONCEALMENT WHETHER INTENTIONAL OR UNINTENTIONAL ENTITLES THE

INJURED PARTY TO RESCIND THE CONTRACT OF INSURANCE.

A. This rule is consistent with the definition of concealment, as negligence tocommunicate that which a party knows and ought to communicate.

B. Insurers Duty to answer all the questions concerning facts material to the risk.C. Effect of Concealment a policy will be vitiated by the suppression of known facts by

a party and the insurer may rescind a policy on the ground of concealment. The

insurer need not prove the fraud in order to rescind the contract on the ground of

concealment. The duty of communication is violated by the fact of concealment, even

when there is no intention to deceive.

7/30/2019 Concealment-Insurance Report Sec 26, 27, 28

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D. Basis of the Rule it misleads or deceives the insurer into accepting the risk, oraccepting it at the rate of premium agreed upon.

E. Insurer relying upon the belief that the assured will disclose every material factwithin his actual or presumed knowledge is misled into a belief that the

circumstances withheld does not exist, and he is thereby induced to estimate the risk

upon a false basis that does not exist.F. Every concealment, whether arising from accident, negligence, inadvertence, or

mistake, if material, will be equally fatal to the contract as if it were intentional or

fraudulent.

G. The Supreme Court held that materiality of the information withheld does notdepend on the state of the mind of the insured. Neither does it depend on the actual

physical events which ensue. Good Faith is no defense in concealment.

H. As a rule, failure on the part of the insured to disclose conditions affecting the risk, ofwhich he is aware, makes the contract voidable at the insurers option.

I. The reason insurance policies are contracts of UTMOST GOOD FAITH.J. The duty to observe good faith are not for the insured alone, but equally so for the

insurer; in fact, it is more for the latter, since his dominant bargaining position carries

with it stricter responsibility.

SEC. 28 EACH PARTY TO A CONTRACT OF INSURANCE MUST COMMUNICATE TO THE OTHER IN

GOOD FAITH, ALL FACTS WITHIN HIS KNOWLEDGE WHICH ARE MATERIAL TO THE CONTRACT

AND AS TO WHICH HE MAKES NO WARRANTY, AND WHICH THE OTHER HAS NOT THE MEANS

OF ASCERTAINING.

This section makes it the duty of each party to a contract of insurance to communicate

in good faith all facts within his knowledge only when:

1. They are material to the contracts ( sec 31, 34, 35 )2. The other has not the means of ascertaining the said facts ( sec 30, 32, 33)3. As to which the party with the duty to communicate makes no warranty ( sec 67-

76 )

THE TEST IS: If the applicant is aware of the existence of some circumstances which he knows

would influence the insurer acting upon his application, good faith requires him to disclose

the circumstance, though unasked.

INSURERS INVESTIGATION : The fact that the insurer makes investigation of its own relative

to the insurability of the applicant does not absolve the latter from speaking the truth or

lessen the right of the insurer to rely on the insureds statement as to his physical condition,especially where the investigation failed to disclose falsity or any suspicious circumstances.